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Ryan Bourne – Increase tax thresholds in line with inflation

Ryan Bourne 2The Chancellor should protect taxpayers from the pernicious effects of fiscal drag. We know 1.4 million more taxpayers have been dragged into the 40p tax band in this Parliament, with the starting threshold being lowered and not keeping pace with inflation. The Chancellor is deluded if he thinks people enjoy this. But it’s not just income tax where fiscal drag has stealthily expropriated taxpayer money. The inheritance tax threshold has been frozen at £325,000 for the past six years, during which time the Retail Price Index has increased by around 25 per cent. And stamp duty land tax has been 3 per cent for properties worth more than £250,000 since 2003 – during which time the average house price in London has increased from £250,000 to £400,000. The Chancellor should announce a law such that all thresholds for these taxes automatically increase by the higher of RPI or wage inflation each year, and governments have to dare to vote it down. If he does not, then brave bankbenchers, following the lead of Rooker and Wise in the 1970s, must amend the Finance Act.

Ryan Bourne is Head of Public Policy at the Institute of Economic Affairs.

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Cllr Sir Merrick Cockell – Help councils work together

Merrick CockellThere are two key asks of the Chancellor which would be warmly welcomed by local government. Both involve taking proven success and applying it across the country.

Firstly, building on the success of the community budget pilots, which allowed a number of councils and their public sector partners to integrate their funding and services much more closely, there should be a nationwide roll-out of this model across most local public services.

Ernst and Young have estimated this could save between £9.4 billion and £20.6 billion over five years. With the evidence showing we can save money and improve services, it is time to stop piloting and simply get on with it.

Secondly, the Government’s ambitious City Deals programme, openly recognises that local areas are best placed to drive economic growth. What started in cities should now be available to all parts of the country. The Prime Minister’s offer of greater financial freedoms for Wales should also apply to the cities and counties of England.

Cllr Sir Merrick Cockell is writing as Chairman of the think-tank Localis.

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Kathy Gyngell and Laura Perrins – Make marriage a viable economic option

The Conservative WomanThe Chancellor must take a fairer approach to family taxation. The direction of travel of tax incentives and benefits goes one way. It favours dual-earning couples and especially those who use formal childcare. Subsidies for couples with a joint income of up to £300,000 – today announced as being worth £2,000 per child per year, up to the age of 12 – are now set to cost the chancellor far more than the original estimated £1 billion

Single-earner married families who chose to care for their children at home are, by contrast, severely penalised. The promised transferable tax allowance of £200 is derisory by comparison. Nor does the Coalition policy of increasing the personal income tax threshold help, as it disproportionately benefits those in the top half of the income distribution.

The Chancellor can begin to rectify this gross imbalance by extending the transferable tax break to all married couples and by making the full personal allowance of £10,000 transferable. This is a more effective way, than raising the personal tax threshold, of benefiting those in the lower half of the income distribution.

The long term social and economic benefits of making marriage a viable economic option again for those in the bottom half of the income scale will outweigh any short-term cost.

Kathy Gyngell and Laura Perrins edit the website The Conservative Woman.

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Ruth Lea – Keep on reducing the deficit

Ruth LeaCompared with last year’s Budget, when there were wild speculations of a “triple dip” recession, the economic background looks much brighter this year. But the state of the public finances remains dire. Underlying public borrowing will still be £110 billion for 2013-14, nearly 7 per cent of GDP, and public sector debt is still rising very fast. The Chancellor’s priority, therefore, has to be to continue with fiscal consolidation. He has rightly already pencilled in significant spending cuts up to 2018-2019 (though whether they will be implemented depends on the political priorities of the Government of the day). In the meantime, there is no room for net “giveaways” and I expect the Budget to be broadly neutral.

More specifically, I would like to see some relief for the “squeezed middle” with a real terms hike in the 40p tax threshold, which I don’t expect, and some freezing of the competitiveness-destroying carbon taxes, which may happen. I live in hope.

Ruth Lea is Economic Adviser, Arbuthnot Banking Group.

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Andrew Lilico – Raise retirement ages faster

LILICO Andrew looking downThe four things I would most like to see in the Budget are as follows:

  • Sticking to spending cuts and deficit reduction – stronger growth and a looming election is no excuse for relaxing now.
  • Target full-time salary at the national minimum wage as the long-term income tax threshold – perhaps even investigate making uprating automatic as the minimum wage is uprated.
  • Announce a shift away from green levies and subsidies for green energy, and instead divert that expenditure into adaptation, resilience and technology research. The floods can be both a pretext and a lesson for this.
  • Announce further measures to raise retirement ages faster. The retirement age should already be over 70, arguably approaching 75. The government is moving in the right direction, but too slowly at present.

Andrew Lilico is a Director and Principal of Europe Economics.

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Christopher Pincher MP – Show voters that the Conservatives are on their side

PINCHER ChristopherThis is the last meaningful Budget before the General Election. So the Chancellor must once again show businesses and voters that he is on their side and they have skin in Conservative victory. He should:

  • Scrap NICs for under-21s, lifting 1 million young people and businesses out of tax.
  • Continue the downward trajectory of Corporation Tax beyond 21p to aid business investment and expansion.
  • Increase tax relief on capital investment to encourage sensible infrastructure.
  • Unblock impediments to house building, e.g. Health & Safety restrictions on the development on brownfield sites.
  • Cut the tax bill for basic rate payers.
  • Raise the 40p tax threshold to rescue some of the people trapped (and feeling it) in it. Or do something equivalent.
  • And for a bit of colour, reform anomalous gross profit taxes on Bingo halls which result in a cumulative punitive tax hit of 32 per cent. That will increase prize money, please punters and increase the tax yield.

Christopher Pincher MP is the Member of Parliament for Tamworth.

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Ruth Porter – Cut employers’ National Insurance Contributions

PORTER RuthThe debate in the lead up to the next election is currently being framed as economic growth versus living costs. In fact, the truth is that economic growth is fundamental to improving living standards. This is the core message the needs to be at the centre of the Chancellor’s message this week. Unless the economy grows, and grows strongly, wages won’t go up. The question then is what can be done to accelerate economic growth and push up wages?

A substantial cut in Employers’ NI – we are suggesting an increase in the threshold that would be the equivalent of £5.4 billion – would give employers more money to pass on in wage increases to staff and would make it cheaper for firms to take on new staff. This in turn would boost employment, driving up wages as companies compete for labour and provide an incentive for employers to make sure they increase productivity amongst their existing workforce.

Ruth Porter is Head of Economic & Social Policy at Policy Exchange.

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Simon Richards – Cut welfare spending

RICHARDS SimonClarity of purpose and consistency of policy are what I look for in a Budget. The key issue is simple: the Government is spending too much of our money and, if the economy is to be put on a sound footing, it needs to spend much less. With an election looming, reductions in spending must, of course, be politically acceptable. Public opinion is ready for deeper cuts in ‘welfare’ spending. The Chancellor should not shrink from making them. In addition, he should scrap a load of worse than useless quangos, starting with the Environment Agency.

Individuals spend their money better than governments. Tax cuts of all kinds do more for growth than any Government initiatives. Taxes seriously damage our wealth; the greatest damage at present is being done by ballooning energy prices, so the Chancellor should scrap all carbon taxes. The Lib Dems won’t like it – tough.

Simon Richards is Chief Executive of the Freedom Association.

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Ryan Shorthouse – Help people into the labour and housing markets

Ryan ShorthouseThe Chancellor should remind voters of the ongoing need for fiscal discipline. That’s one of the principle reasons to vote Tory. The other is rewarding aspiration. In particular, supporting those working hard to break into, and advance in, the labour and housing markets – the two greatest sources of individual prosperity in Britain.

So, with the tight funding envelope he has, he should concentrate on raising the personal tax allowance and the threshold for paying National Insurance, especially for the entrepreneurial self-employed. This would benefit low, middle and high income taxpayers. Stamp duty should be reduced for homes under £500,000. And announce that a few more garden cities will have to be built, not just Ebbsfleet.

In an increasingly globalised, knowledge-based economy, better education attainment will lead to greater personal and national prosperity. So, offer parents government-backed, income-contingent loans to pay for childcare, so that all have the opportunity to afford high-quality pre-school education, the most vital part of the education system. Do the same for students wanting to take postgraduate degrees. And provide a new fund for schools to find ways of training and incentivising better quality teachers.

Ryan Shorthouse is the Director of Bright Blue.

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Stephen Tall – Take more of the low-paid out of income tax

TALL Stephen KriegMy top three requests:

  • No surprise this one: an increase in the personal allowance to £10,500 take more of the low-paid out of income tax. The Lib Dems alone campaigned for this tax-cut in 2010; now both the Tories and Labour want to do it. (It would be more progressive to raise the National Insurance threshold, albeit politically less sellable; then abolish NI completely, merging it into income tax.)
  • A major transfer of funding powers from central to local government. Two-thirds of what councils spend comes from central government grants, meaning councils aren’t properly accountable to the voters. Not only does this undermine local democracy, but it stifles innovation in tax-raising and tax-spending according to local priorities. (Have a read of CentreForum’s Budget 2014 proposals for more detail on how these would work in practice.)
  • Scrap the absurd twice-yearly cycle of Budgets and Autumn Statements, as proposed by Tim Harford here. Governments should offer the confidence that comes with three-year planning to businesses and households, rather than this constant ad hoc tinkering. It would also give the Treasury the time and space needed to take a long-term look at tax and spend, becoming more strategic and less tactical.

Stephen Tall is Co-Editor of Liberal Democrat Voice and a ConservativeHome columnist.

23 comments for: We ask our panel: What do you want to see in tomorrow’s Budget?

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